Sept. 4 (Bloomberg) -- German stocks advanced for the first time this week as Goldman Sachs Group Inc. lifted its stance on European banks and strategists increased their year- end forecasts for regional equity indexes.

Deutsche Bank AG and Commerzbank AG, the country’s biggest banks, climbed at least 3.5 percent. Daimler AG and Bayerische Motoren Werke AG, the world’s largest makers of luxury cars, added more than 5 percent.

The benchmark DAX Index increased 1.6 percent to 5,384.43, the biggest gain in two weeks. The gauge has fallen 2.4 percent this week on concern a six-month rally has outpaced the prospects for earnings and economic growth. The broader HDAX Index also gained 1.6 percent today.

Goldman Sachs Group Inc. raised its year-end forecast for the Dow Jones Stoxx 600 Index to 260 from 235, while UBS AG strategist Nick Nelson increased his target for the FTSEurofirst 300 Index to 1,100 from 1,000.

“While we agree that the market tends to make its strongest returns while the economy is still contracting, albeit at a slowing rate, it tends to make further gains as the economy begins to expand,” a team of Goldman Sachs strategists led by Peter Oppenheimer in London wrote in a report dated yesterday.

The pace of U.S. job losses slowed in August as signs emerged that the recession is ending, while the unemployment rate reached a 26-year high, underscoring threats to consumer spending gains in the recovery. Employers cut 216,000 from payrolls after a 276,000 drop in July, Labor Department data showed today in Washington. The jobless rate jumped to 9.7 percent from 9.4 percent.

‘Modest Overweight’

Deutsche Bank rose 3.5 percent to 48.50 euros, while Commerzbank jumped 4.7 percent to 6.98 euros. Goldman Sachs lifted its recommendation on banks to a “modest overweight” from “neutral,” adding it maintains a “broadly cyclical bias,” preferring shares that are linked to economic growth.

Daimler surged 5.1 percent to 31.83 euros. The world’s second-biggest maker luxury cars doesn’t plan to cut jobs for the moment and will trim costs by more than the 4 billion euros ($5.7 billion) planned for 2009, Bild Zeitung reported, citing an interview with Chief Executive Officer Dieter Zetsche.

BMW added 5.2 percent to 31.73 euros. The Dow Jones Stoxx 600 Automobiles & Parts Index rose as much as 4.2 percent today.

Siemens AG gained 1.9 percent to 60.25 euros. Siemens, Areva SA and Alstom SA, three of Europe’s largest engineering companies, are competing for control of Solel Solar Systems Ltd. as demand for renewable energy rises, three people familiar with the negotiations said.

DAX Review

Separately, Siemens will raise its stake in SEPGE, a subsidiary of Shanghai Electric Group Co., to 40 percent from a holding of more than 10 percent, Shanghai Electric said.

Deutsche Telekom AG added 3 percent to 9.40 euros. Europe’s biggest telephone company has started talks with Vodafone Group Plc, France Telecom SA and Telefonica SA about selling its T-Mobile U.K. unit, the Financial Times reported, citing people familiar with the situation.

Infineon Technologies AG increased 3.8 percent to 3.73 euros. Europe’s second-largest maker of semiconductors was picked to replace Hannover Re in the DAX Index after the stock rallied more than fourfold this year. The changes will take effect on Sept. 21, Deutsche Boerse AG, the operator of the Frankfurt exchange, said yesterday. Hannover Re slipped 0.1 percent to 30.02 euros.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Aareal Bank AG (ARL GY) surged 8.5 percent to 14.18 euros after Deutsche Boerse said the lender will replace Hypo Real Estate Holding AG in the MDAX Index of medium- sized companies. Kuka AG (KU2 GY) dropped 5.3 percent to 11.18 euros as shares of the machinery maker will leave the measure.

Bauer AG (B5A GY) climbed 5.3 percent to 26.27 euros, the biggest gain in more than a week. The German builder that laid foundations for the world’s tallest building was added to the “conviction buy” list at Goldman Sachs Group Inc., which said “the shares offer an attractive risk/return profile.” The bank has a price estimate of 35.50 euros on the stock, according to a report today.

Celesio AG (CLS1 GY) rallied 1.5 percent to 18.56 euros. Europe’s largest drug wholesaler repeated its outlook for earnings before interest, tax, depreciation and amortization of just over 600 million euros this year. The company commented in a presentation on its Web site today.

Commerzbank AG raised its recommendation for the stock to “hold” from “reduce.”

ProSiebenSat.1 Media AG (PSM GY) surged 5.6 percent to 7.18 euros, extending yesterday’s 7.3 percent advance. Germany’s biggest private broadcaster sees a slight increase in its viewer market share, beating the market, Chief Executive Officer Thomas Ebeling told Frankfurter Allgemeine Zeitung in an interview.

Puma AG (PUM GY) rose 5.1 percent to 206.02 euros, the second gain this week. Europe’s second-largest sporting goods maker was raised to “overweight” from “neutral” at HSBC Holdings Plc.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net.

Last Updated: September 4, 2009 11:52 EDT